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tv   Key Capitol Hill Hearings  CSPAN  March 3, 2014 8:30pm-10:31pm EST

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that needed a secretary, deputy second or under secretary had to participate in and had meetings once a week or months or whatever. so i sent a questionnaire to them and said how many task forces do you think we could eliminate and what do you think the answer was? none. even though some of them never went to them. some never met. but when push came to shove, they didn't want to give it up because they said in some future, there might be a task force that helps. so i think if we checked with the federal agents, they would say they don't give back. but a market analyst doing an w outside independent report would
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be different. >> host: thank you both for being here. this is the "the communicators" >> president obama sends the 2015 budget report in. the president said he wants to reduce defense spending and also wants to spend additional money on roads and bridges and end a number of corporate tax breaks. we will have live coverage at 11:30 a.m. eastern on c-span. >> c-span 2 provided key coverage and booktv. the only television network devoted to non-fiction books and authors.
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>> sweeds have been accused of trying to hide the accounts of 22 united states citizens. carl levin is calling on the justice department to hand over the names of those who used the bank at a -- to alem ledgedly avoid paying taxes. >> good morning. the meeting will come to order. the american public is angry about offshore tax abuse and efforts by americans to evade their tax obligations by hiding money offshore. today's hearing follows up on a
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meeting this subcommittee held in 2008 when we presented evidence that well-known banks were deliberately helping united states clients cheat on their taxes by opening offshore counts never reported to the irs despite united states law requiring their disclosure. the hearing focused in part on ubs, the largest bank in switzerland that had 52, 000 customers and $18 million in assets. and sent swiss bankers on u.s. soil to assist them. they acknowledged what they were
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up to and committed to stop: they signed a deferred prosecution agreement and agreeed to close them and turned over 250 names. and the proceeding that took another year, they cuffed up more accounts for a total of 4700 accounts. ubs' action sent a signal that cheats better pay up or face prosecution. thousands of people with accounts in other offshore secrecy jurisditions joined a
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voluntary program to disclose themselves by the irs. and 43,000 taxpayers have paid back taxes, interest and penalties totaling $6 billion with more. tax evaders acted to avoid being prosecutes. ubs signaled a shift in the off size world. switzerland declared they would no longer use secrecy laws. a flurry of new tax information agreements were signed around the world promising new transparency. the g-20 world leeraders declar quote the era of bank secrecy is
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over. well five years later it isn't gone. billions in unpaid taxes remain uncollected thanks to tax evaders use of bank secrecy and we have great concern the battle to collect the assets seems stalled. our investigation chronicles the uneven process made in identifying u.s. taxpayer who cheated uncle sam by using offshore accounts. a bipartisan reports states chapter and verse of the failure to collect taxes hold and hold them accountable for the person that evaded and the tax agents that helped him. we have a detailed case study involving credit sweeps. after the ubs standal broke,
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credit sweeps admitted to investigators they were involved in this, but they were going to clean up. seven were indicted by the just department in 2011. we checked in again and found thousands of undeclared swiss accounts were still open held by u. u.s. taxpayer. credit sweeps was holding bad how bad the problem was. they had over 22,000 united states customers with counts over $10-12 billion united states dollar. nearly 1500 accounts were open
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in the name of offshore shell companies to hide united states-ownership. another 2000 were opened at credit sweeps private bank. ten thousands were serviced by a special branch at the zurich airport that allowed them to fly in and do banking without leaving the ground. a swiss desk with 15 bankers trained in u.s. taxes but the policy was ignored. in 2008, 1800 bankers handle one or more u.s. account.
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one u.s. client told the subcommit about visiting the office in zurich. they were sent to a bare room with white walls and focus on the bank's secrecy. the client opened after being told the bank didn't requirement completion of the w9. without that form, the account wasn't reported to united states authorities. in later visits, the client was offered cash withdrawals. and the client signed a form ordering that the credit sweep account statements be immediately shredded. it was a classic example of tax evasion. the bankers didn't stay in
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switzerland. they traveled across the united states. ten bankers took 170 trips from 2001-2008 to look for new clients and service existing accounts. credit sweeps plan them to host the annual balls in florida and hold golf tournaments and some met with 30-40 clients in a single trip to attend to their bank needs. we learned of one swiss banker who met with an american and slipped papers through a u.s. sports illustrated magazine. many provided broker services
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for united states clients resulting in the 196 million fine that credit sweeps paid last week. some swiss bankers advised clients to avoid filing cash transactions over $10,000 is required by law. other bankers helped united states set up offshore account to hide and the trial. some banbankers lied saying the came over to travel but for business. they were aiding and abating tax evasion in switzerland and on
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u.s. soil. credit sweeps initiated exit projects to close the u.s.-client accounts in switzerland. those projects took five years until 2013 to complete. they bank verified accounts for 3500 out of the 22,000 clients as compliant with tax law meaning they complied with the irs. so where are we now? unlike ubs, united states enforcement action against credit sweep has stalled. the bank got a target letter in 2011, three years ago, while seven of their bankers were
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indicted by united states prosecution in 2011, none have stood trial or been the subject of extradition. that is not much accountability. taxes remain uncollected. to collect those unpaid taxes and to hold united states tax evaders accountable, the cr critical first step is getting their names. the prospect of getting the names produced the ubs affect. the rush of offshore account holders making disclosures to the irs and paying what they owe to avoid embarrassment and worse. but getting names is where this whole story goes bust.
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there is a chart which i would ask that we put up. it is a chart of the 22, 000 united states clites with swiss accou accounts. the total number disclosed by the swiss to the united states over five years is a grand total of 238. that is 238-22,000. about 1%. other swiss banks with thousands of clients in united states and switzerland have disclosed, as far as we know, no names at all. the reason for this failure is continued swiss insistence on bank secrecy and the united states letting them get away with it. when we issued suspbpoensubpoen
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the names, the swiss government inserted itself in the criminal investigation to stand between the bank and our department of justice. it told credit sweeps it couldn't deliver documents directly to the united states that it had to funnel them through the swiss first. so despite the subpoenas, the department of justice didn't attempt to enforce them in a united states court. nor did the department of justice turn into the irs to issue a summons even though it was a john doe summons to have them turn over the largest production from switzerland so far. rather than using the proven
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u.s. tools that could be enforced in courts, department of justice reversed course from the approach and for fives years they limited the request for swiss documents including the name of tax evaders under a u.s.-swiss tax treaty despite the treaties highly restrictive, maddening slow unproductive process. in 2011, the department of justice submitted a treaty request for united states client names and information from credit sweep and told the swiss government the department of justice saw this as a test case of switzerland willingness to produce critical documents. at the end of the process that took two request, two court decisions and nearly two years, in the summer of 2013, the
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department of justice was rewarded with the 238 accounts. getting 238 out of 22, 000, less than 1% is more than an embarrassment. it advocates the home court advantage of using u.s. courts. the law, which is accepted almost everywhere, including the united states, is that if a bank choses to do business in a foreign country, it must accept and operate under the laws of that country. be restricting itself to the treaty process, it department of justice handed over control of u.s. information request to swiss regulators and courts that rule on how they will be handled
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and elevate bank secrecy over disclosures. but the swiss roadblocks didn't end there, in 2009, switzerland agreed to amend the u.s. tax treaty to replace their highly restrictive tax fraud scandal with the less restrictive relevant standard. but they insisted the less restrictred disclosure standard be used only for information regarding swiss accounts in existence after the amendments were signed on september 23, 2009. u.s. negotiating went along but it can't be used for tens of thousands of swiss accounts employed for tax evasion before
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2009. the end result is the tax evaders and the ones that helped them may get along with wrongdoing. and they enacted another ro roadblock to acquiring the name. they said now, the u.s. request, the holder of the bank must be shown to significantly contribute to the pattern of conduct by the unnamed account holders. in other words, the department of justice has to prove a bang is guilty of facilitating this conduct by a group of unnamed holders before it can get the
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information need today prove the misconduct. even if the department of just wanted to meet the standard, it would have to do so in a country that prides themselves on bank secrecy. it is rigged game. during the same time period, swiss pressed the department of justice to create a program to enable most of the banks other than the 14 large banks under active department of justice investigation, to obtain non-prosecution agreements or non-target letters in exchange for providing limited information and monetary funds but without producing any u.s.-client names. in response, the department of justice in 2013, announced a program to give prosecute
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amnesty to hundreds of swiss banks without requiring them to disclose a single u.s. name. giving up on getting the u.s. names contradicts the policy of demanding full cooperation from parties excused from prosecution. it sets a bad president for how the department of justice will handle the other tax haven banks. it lows the banks to give use united states prosecutors hits and clues that might help the united states in the hunt for tax evaders instead of a straight list of accounts that existed before august 2008 are not even covered. united states has been told to piece the clues together, go on a treasure hunt trying to
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identify accounts, using very li limited information while the swiss banks get immunity from prosecution. a swiss court turned down a u.s. treaty request for client names ruling the fact a swiss account was disclosed wasn't enough to justify the swiss secrecy laws. the swiss found preserving bank secrecy more important than supporting united states effort to prosecute tax evasion. after they overcame the 4700
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accounts, many predicted the swiss secrecy wouldn't impede anymore. in 2008, testimony before the subcommittee pledged to act interjecting. kevin o'connor testified that quote we will not be deterred. we will pursue other formal and informal efforts of maintaining the formal efforts we seek. he said this includes the use of john doe summons and grand jury subpoenas close quote. that didn't happen as promised. but it isn't too late.
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they can use the tools to get u.s.-client names from the 14 targeted banks which include some of the largest banks. the department of justice can make extradition request for indi indicted swiss bankers and test their willingnes to cooperate with the tax enforcement. the department of justice can hold accountable the tax evader and the banks that helped them if the department has the will. we are asking by the department of justice slowed the investigation of the 14 banks through the failure to use the tools, why it accepted the secrecy tools, why it obtained
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only 132 accounts, and how it plans to collect the billions of taxes owed on credit sweep accoun accounts. allowing americans to hide their money in offshore accounts deprives the government of needed revenue and deprives honest americans with fairness. laws need to be made to make sure they don't cheat uncle samp and pay what they owe. i would like to thank by ranking republican john mccain and his great stand and their great
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staff in this and carrying on the bipartisan work that started with senator coburn. he is now the ranking member of the full committee. we welcome here. but first we will call on my rank member, mr. john mccain. >> thank you for that. i thank you and all of the staff for the work on this issue. the bipartisan investigation and tax haven bank focus on switzerland's second largest bank. the investigation revealed another example of a foreign bank sucoming to the charm over
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compliance and they greatly profited by helping the united states clients hide billions of taxable assets from the united states treasury by undermining tax and security laws and taking advantage of switzerland banking practices. today's hearing will look at past misconduct and highlight how the bank delayed the compliance and consider how the department of justice ineffective response allowed this conduct to persist, how credit sweep bankers helped the united states clients hide assets and keep them hidden was
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horrible. they had hidden rooms and magazines in american hotel lobbies and family events were all used by bankers to unsuspectedly conduct illislicit businesses. they said they were coming for tourism but would meet with clients, a violation of united states security laws. in one instance, a banker came to attend a wedding of a person, but the banker took advantage of this social occasion to brief his client on the status of the clients' undeclared account. these alarming instances belong into spy novel.
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not one of the world's top banks. it went largely unchallenged until 2008 when this subcommittee did hearing and credit sweeps prospered by not requiring their united states clients to be tax compliant. they made some changes to internal policy, but it was slow, and the bank still must answers to decades of profits that were illgotten. ...
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deceiving the u.s. government and the american people. the time of fiscal hardship, the justice department appears to have willingly given a on using the tools that it has to correct taxes owed to the u.s. government. in 2008 alone the justice department obtained information on u.s. tax evaders from swiss bank bleeding to 72 prosecutions but from 2009 to 2013 the justice department seems to have abandoned its efforts issuing no summonses and enforcing no
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subpoenas against u.s. banks. in fact, i'm sure the justice department will probably dispute that. but facts are stubborn things. in 2009-2013 the justice department issued no summonses and enforced no subpoenas against you that -- swiss banks. in fact, even though in 2011 the justice department indicted a handful of individual credit swiss bankers for engaging in an illicit banking practices, today it has failed to prosecute these indictments. since 2011. instead the justice department has opted to play the role of diplomat helping to negotiate with the swiss government the creation of a program and allow swiss banks to voluntarily disclose there tax evasion practices without risk of prosecution in the u.s. as a result some banks may not even have to admit any wrongdoing for their misconduct.
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in the committee's financial restitutions will simply pay fines. as a result of offshore tax haven practices by credit suisse and other financial restitution spot as recently as two dozen 11 it has been estimated that the united states has been deprived of $337 billion in potential revenue. the largest amount of revenue lost due to tax evasion in the world faugh says. with this in mind the justice department should be relentless in continuing its investigations in the foreign bank such as chris reese and seek penalties the reflect the severity of their wrongdoing since, as
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scores than of their obligations to make aggrieved taxpayers sole end effectively deter similar misconduct in the future. is past time to fully and clearly expose how offshore tax haven banks helped american account holders evade paying there taxes. wanted thank the witnesses for appearing before the subcommittee today, and alex -- i look forward to their testimony. i wanted thank center cockburn. thank you, mr. chairman. >> thank you. as i mentioned, this has been a lengthy investigation lasting well over two years. until january of last year the ranking member of our subcommittee was dr. coburn. he and his staff played a major role in the early part of this investigation, very important part of the investigation. i now call on him as the ranking member of powerful committee,
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the former ranking member of the subcommittee. welcome back to our subcommittee . >> i have a statement for the record. macon and observation -- make an observation. when you have a justice department that selectively carries out the law rather than caryatids of to fully enforce the law you have problems like this that occur. and we don't just see it in this case. we see it across a broad array of laws that are selectively enforced to the detriment of undermining the glue that holds this country together which is the rule of law. and my disappointment in the actions of the justice department in this case are great, but not greater than what i see and the leaders of this justice department, a leader who
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does not take his oath seriously , does not do what is necessary to enhance the glue that binds us together. i want to thank senator levin and senator mccain. these are thorough investigations. this one has been extremely difficult in terms of getting information. the report is comprehensive. i also would think the present leaders of credit suisse for, one, admitting culpability and, too, coming to testify and being open and honest with us. and the final point i would make is that the tax treaty that has been negotiated needs to be completed. and then we need to put the pressure on to enhance further improvements to that so that we
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will not have the same thing is occurring. with that, i yield back. >> thank you so much. the likelihood is that we will be at recess approximately from one until 3:00 p.m. and we will begin this second panel. the reason i say that is the likelihood is because we don't
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know precisely when his panel will be over, and if it goes beyond 12:00 -- 12:31 p.m., we will continue with this panel until it is concluded. i don't know if that came out clearly, but it is the best i can do at the moment. we will now call a first panel for this morning's hearing. its chief executive officer of credit suisse group ag in new york. mr. -- general counsel of credit suisse group ag in zurich, switzerland. the co-head of private banking and asset wealth management of credit suisse group ag in zurich, switzerland. and mr. robert shaffer, the co co-head of private banking and asset wealth management of credit suisse group ag in new york. we appreciate all of you being with us here this morning and look for to your testimony pursuant to rule six all witnesses to testify before this
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subcommittee are required to be sworn. at this time i would ask you to please stand and raise your right hand. do you swear that the testimony you give before this subcommittee will be the truth, whole truth, and nothing but the truth so help you god? we will be using a timing system for our witnesses today. be aware that approximately one minute before the red light comes on you will see the light changed from green to level -- green to yellow, giving you an opportunity to conclude your remarks. well your written testimony will be printed in the record in its entirety, we ask that you limit your oral testimony to 15 minutes. if you need additional time beyond that i am sure that we can find a way to provided to you. please proceed. >> good morning, sharon levin,
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ranking member mccain, members of the subcommittee. my name is brady dugan. i became the chief executive officer of credit suisse in 2007. i am joined by the general counsel of credit suisse tense 2009 and by @booktv who have served since 2012 as co- said. i would like to thank you for the opportunity to appear before the subcommittee today. mr. chairman, i would like to make a brief opening statement and ask, as you mentioned, that are longer, prepared statement and a written comments to the report be included in its entirety to the hearing record. my fellow panelists will make brief oral statements in, but they have allowed me to encroach somewhat on their time. i would like to begin by providing background. our bank operates in more than 50 countries and has over 45,000 employees, including approximately 9,000 employees in
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19 locations in the united states. in the u.s. we're regulated by the federal reserve, have a new york branch which is supervised by the new york department of financial services. we also have three regulated u.s. broker-dealer subsidiaries. our primary u.s. broker-dealer has been designated systemically important as a financial restitution under the dodd-frank law. our bank has a deep and substantial business in the united states. a credit suisse management team also has strong personal ties and commitments to the united states. how we are american citizens. i am the first american ceo of a major swiss bank. our general counsel is an attorney who was admitted to both the swiss and california bars. and vons has worked in the united states. our bank also has deep roots in the united states. parts of today's credit suisse date back to the first boston corporation, a u.s. firm that has its roots going back to the 18th-century.
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mr. chairman, there are a few key points i would like to clearly express to the subcommittee at the outset. in 2008 your subcommittee first held hearings highlighting abuses of swiss banking secrecy to hide on tax u.s. assets. that event one year into my to near challenged the entire swiss banking sector encouraged us to push forward, work hard, and help bring about the transformation in the swiss banking system. over the past five years credit squeeze has become one of the leaders in switzerland, encouraging illegal, cultural, and business changes to enable the united states have transparent access to information about u.s. clients and to enable the united states to recover taxes that are still on paid by americans holding assets abroad. i can assure you that not all banks in switzerland agree with us and many have privately and publicly opposed the positions that we take. for me it is clear. swiss banks can only hold assets
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the u.s. clients have established our compliance with u.s. tax law. seeking out u.s. customers who want to hide untaxed assets and profiting from these untaxed assets is simply not acceptable. mr. chairman, we are working daily to build a different and better legal and cultural reality for credit suisse and the swiss private banking model. we have tried to demonstrate in this area and a number of different ways. we have supported legal steps both here and in switzerland that would enable the u.s. authorities to obtain information and recover unpaid taxes from u.s. plants. credit suisse has strongly supported at every opportunity, supporting about the u.s. and switzerland and working closely with the united states senate to make the law as effective as possible. while we supported the law, other banks opposed to. because we embraced it credit suisse now has in place sooner than required procedures to make sure u.s. clients demonstrate
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compliance with u.s. tax law. in addition, we support for information exchange including the oecd efforts towards global standards for automatic information exchange. we have also supported the ratification of the protocol for the double taxation treaty agreed to by the u.s. and swiss governments in 2009 and approved by the swiss parliament almost four years ago. credit suisse is ready at this moment to revive -- provide the additional information by u.s. accounts that has been requested by u.s. authorities but we have been unable to do so because the u.s. and has not yet ratified the protocol. we urge the senate to ratify the protocols of the swiss banks can assist the u.s. authorities in recovering and pay u.s. taxes. we have practically taken steps to require that only those u.s. clients to establish compliance with u.s. tax laws can be clients of our bank.
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in 2008 when ubs became the first was bank to become the focus of investigation by the justice department and the subcommittee and many u.s. resident plans left ubs, some other swiss banks welcome those clients, but credit suisse in the league prohibited the transfer of assets from those former ups client star banc. long before investigation by u.s. authorities, credit suisse, again, on our own initiative, moved to address issues highlighted by the ups situation we wanted to ensure that all u.s. clients about bank establish compliance with u.s. law and prioritize that based upon what we understood were the key priorities of the u.s. government. of the past five years we pushed forward with a significant and complex for mediation exercise. in addition to dedicated staff we hired numerous outside experts, law firms, accountants, and others to help check whether clients it might have a possible u.s. connection were identified.
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if they had any connection they were required to demonstrate their compliance with u.s. tax law if they wanted to remain klans of our bank. to check the thoroughness of our efforts we hired one of the big four accounting firms which carefully analyzed we had done. to -- in 2013 this firm confirmed that we have identified the complete population of potential u.s. account relationships to an extremely high level of confidence. our mediation has been extensive and demonstrable, and the results of the substantial effort had been permitted to represented to the subcommittee staff. we recognize it despite our efforts credit suisse has not been free of problems. we have invested enormous efforts to achieve as much clarity as possible about whether and to what extent credit suisse employees violated u.s. law or help clients to sell we commissioned an independent internal investigation by u.s. and swiss law firms that review all aspects of the bank's swiss
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-- swiss-based private banking. the investigation identified evidence of violation of bank policy and u.s. laws that were centered on a small group of swiss-based private bankers. the investigation evidence showed that these people went to great lengths to disguise their bad conduct from the bank. we have presented the subcommittee with the unvarnished results of our internal investigation. credit suisse management team regrets deeply that despite the industry-leading compliance measures we put in place, we had some swiss-based private bankers to appear to have violated u.s. law. while i am extremely dismayed by their conduct, i also believe that requires facing up to the past and taking responsibility. mr. chairman, let me conclude by stating that we made a decision some years ago to work hard and help bring about a transformation of the swiss banking industry to the high standards of compliance. we have tried sincerely to
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demonstrate our lead. for me personally it has been one of my highest priorities to get this fixed, get it right, and i believe we have made significant progress toward that goal. with that, with your permission i would like to turn it over to our general counsel. >> thank you very much. >> good morning, chairman live-in, ranking member mccain, members of the subcommittee. i have served as the general counsel since 2009. i am happy to appear today to answer your questions. we have taken a hard look at this issue, and i will explain everything to the extent possible. before 2008 hour bake, like many banks in switzerland at the time had the view that tax compliance was a matter that was between
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individual taxpayers and that taxpayers government. looking back that approach left the bank vulnerable to abuse by those u.s. clients and swiss private bankers who wanted to hide untaxed assets. in effect preventing u.s. accounts from holding untaxed assets was not a priority. that was a mistake. but since that time there has been a real and meaningful change, and i should say that one of the most important drivers of that change has been this very subcommittee and the most particularly the subcommittee report of july 2008 concerning ubs. once the report came out, within one week we immediately decided that we would not take in the account holders that were leaving ubs as a result of the revelations in that report.
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we also decided that we would identify and close u.s. taxpayer accounts that would not or could not prove tax compliance. we believe that our swiss-based private banker serving u.s. plans for complying with policies. we were wrong. in fact, as we later learned we had a problem. we have taken a number of important steps to face up to the past and guard against a recurrence of these problems. first we commissioned a full and independent internal investigation as to what happened and have provided detailed information to the u.s. authorities. we have searched for the truth of what happened with the view that we need to take responsibility and resolve these
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matters. second, we have worked very hard to get u.s. authorities the necessary information they wanted. this has not been easy. given that we need to comply with the loss of those -- both the united states and switzerland and dissolve sometimes directly conflicting. third, our efforts have been cleared it -- included urging both the swiss parliament and u.s. senate to adopt that 2009 protocols to this double taxation treaty. while the swiss parliament adopted the protocols a long time ago, it still awaits ratification by the united states senate. fourth, we have worked very hard to close all u.s. accounts where clients have not demonstrated compliance in fulfilling there reporting obligations.
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this -- participating in the irs voluntary disclosure program which enables the irs to recoup on paid taxes. we have made real progress improving our compliance standards. for example, we have prepared for the implementation of a foreign account tax compliance act ahead of time and have been a vocal leader in switzerland and globally in support which will bring about important changes in providing the irs information about u.s. accounts held abroad. senators, when we make mistakes we take responsibility and toller cells to high standards. the last five years have been an
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important wake-up call for the swiss private banking industry. we have learned real lessons and we have genuinely tried to use this experience as an opportunity to meaningfully improve our banks' compliance from marked off of. >> thank you very much, mr. romeo cerutti. >> good morning, ranking member mccain. good morning members of the subcommittee. my name is martin. i am the co-head. i have had the privilege of working in this country and also had the opportunity to complete advanced management programs. i joined credit suisse in august august 2008 as the original ceo
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of switzerland. in that role one of the main tasks was to enhance and to drive the integration of the various local businesses in switzerland to man including the investment banking business, asset management, private banking, the retail and commercial business in switzerland. in august, 2011, became the chief executive officer of the private banking division. in november 2012 robert shafir and i were appointed to the newly formed division called private banking and wealth management. as a swiss person who has spent closely to 30 years in the financial industry there are two points a want to emphasize. the first is that we agree that swiss bank secrecy was abused by some clients in order to hide
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untaxed money from the local tax authority. we also recognize that there were some swiss bankers, business people who helped those plans to hide their untaxed money. i want to state that clearly and directly. this approach by some clients and swiss bankers is totally unacceptable. not everyone in switzerland wants to deal with this. in my view the swiss banks have to recognize this issue and have to accept there share of responsibility. the second point i want to make is that it is clear to me personally and it is clear to the entire management team of the bank that the only way forward for the private banking business of credit suisse and for all the swiss banks is to serve on the -- of the u.s. plans to can establish compliance with u.s. law.
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has been our goal for some years. in 2008 while other banks in switzerland accepted u.s. clients who left ubs, we prohibited exception of those plants. we have conducted a series of intensive projects over the last five years to check that only u.s. plant to can demonstrate that they had established compliance with u.s. tax law can be clients of credit suisse. we are doing this because we do not want u.s. clients or not fully compliant with the laws of this country. the private banking industry worldwide, not just in switzerland, has been going through a process of change for years in the direction to clear, transparency international exchange of information and working closely together to enhance and improve the business . robert shafir and i'm welcome
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this change. because we strongly believe that is the only way forward for the financial center and the international private banking community. thank you. >> thank you very much. >> good morning. ranking member, members of the subcommittee. my name is ron shaffer. i am the co-head of the private banking and wealth management division. i joined credit suisse in 2007 and have had a 30 year career. i appreciate you giving me a chance the to the subcommittee today. from 2007 to 2012i have served at different times as the chief executive officer of the americas region and chief executive officer of our asset management business. i have been on the executive board since i joined the bank. from the time i joined credit
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suisse i have experienced firsthand a sincere and unambiguous culture of compliance. our leaders have an intense focus on controls, a strong and committed group of employees who are ready and empowered to enforce the highest standards in the way we do business. that commitment starts with mr. mr. brady dougan and the board of directors and is crystal clear to the members of the executive board and employees on down the line in the united states, switzerland, and the rest of the world. from outside the bank piquancy our culture compliance and the concrete steps we take. i have witnessed during my time that the executive board has a constant focus on creating a compliance culture and the bankers may significant progress in that direction. you can also see the other steps that we have taken to support greater transparency in international banking, strongly advocating in favor of the protocols of double taxation
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along with a mutual assistance and tax matters and a publicly supported the enactment of the implementation of a law which represents a major advance in international information sharing. even though the official implementation has been delayed, we proactively adopted requirements that exceed what will be required and have done so and a faster timetable than required and in. then and now we are totally committed to ensuring that our clients and businesses are complying with u.s. legal requirements. i am not suggesting, mr. chairman, that we get it right every time or that we are always able to detect the problem is and as we would like it will co compliance at every level of this bank and to empower the people and control functions. in 2012 by was asked to join my
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partner as co-head of the private banking and wealth management division. i am the first american to serve as co-head of this business at our bank. mr. hans-ulrich meister and i are completely and the same page and it comes to the strategy we are implementing, the value proposition of credit suisse for u.s. clients is that we can manage client assets with the senate plan service and performance. there is no value proposition and having u.s. plants that have not demonstrated compliance with u.s. law. mr. chairman, these are the standards we have set for ourselves. this is where credit suisse is now. we believe this is the responsible unnecessary future of the international banking industry. thank you for your time. >> thank you very much. we will have many rounds of questions, but let's have ten minutes for each round for each of us.
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in your opening statements you pointed to the -- he said that credit suisse is willing to provide names of u.s. customers to help swiss accounts pending ratification of the 2009 s was protocol. that will not have the protection of u.s. account names that were closed before september 2009, right? is that correct? >> that is correct. any account that was still open at that time, you will get information. a lot of the cows that were close at that time went on to other swiss banks. if they make the same request. >> of course the swiss parliament has amended the law
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we have to make certain proves before we can get the information from those other banks, bits and pieces are provided instead of the names, instead of you're going back and giving us the names which would allow us to collect the taxes, instead you hide behind swiss secrecy laws. we are interested in collecting taxes as well that are owed and have been invaded and we need the cooperation of the banks in order to do that. if the banks will cooperate citing swiss secrecy laws we simply have to use our own domestic laws to force cooperation from the banks. you cite swiss secrecy laws. i gather you said, i think, mr. dugan, you don't agree with those laws. >> i think our position is very clear. we are ready to provide any information that we can legally provide. i think that, as you point out, the issue we have is we have two
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different legal jurisdictions and therefore for us to break the law in one jurisdiction in order to provide that information is difficult for us to do. the most important thing from our point of view, we can necessarily influence these discussions between governments and how to proceed. we are ready to provide any information that we can provide legally, and we do believe that the new treaty approval would actually provide a lot of facility for the irs and for the department of justice to get a lot of the information that they need. >> i have indicated that we hope that treaty will get ratified, but it has its limits. and number of them are that it does not apply to thousands of accounts of people who owe us money. you folks have not been willing to give us more than 238 of those accounts, and that means that we lose billions of dollars in tax collections, and that is
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unacceptable to us. we are not going to get cooperation from the swiss -- and we will make this points strongly to our own treasury people this afternoon. we are going to use our own means, our own means are subpoenas and to use the ways in which we can enforce our own laws in order to get those names. and so you can say that you are caught between two countries' laws. when you come to this country, you send bankers into the united states, set up an office in the united states can help u.s. customers hide what they're doing from u.s. authorities, that is what you did. and now the jig is up. you say you want to cooperate, but you can't because of the swiss secrecy laws. those laws don't apply in the united states could be you are operating in the united states. and so we believe and we think
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the law which is fairly well except around the world is that if you're going to operate in the country you must abide by the laws of those countries and cannot hide behind the laws of their own country. that is not the way it works. we will put a lot of pressure on our justice department -- i said our treasury, but it would be our justice department to enforce the laws here and to enforce them against you if you are unwilling to do what our laws, we believe, require you to do which is to turn over the names of the people whom you eight and abetted in tax evasion >> mr. chairman -- >> let me just ask you about swiss laws, by the way. have you urged the swiss government to change the laws to allow disclosure of u.s. government names? -- of u.s. customer names? you urged the swiss government to change the laws? >> we have actually worked at all levels within switzerland,
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certainly with the government, with regulators and also have been public about our support for increasing the ability for transparency, as we have said -- >> that's not my question. my question is -- >> chairman. >> credit suisse urged the swiss government publicly to change the law so that you can turn over the names of your customers that you had prior to 2009. >> chairman, we have absolutely the same goal. >> no, not the same goal. it is a very specific question. caviars the government to change the law so you can create via -- so that we can collect back taxes. >> chains law. >> chainsaw so you can provide us those names. >> we have encouraged them, done it publicly, supported that bill >> and you are saying other banks have not?
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not the goal, because the gold can be achieved in the eyes of some through a treaty which gives us bits and pieces, not names. what the new treaty does is say, we are not going to give you the names. we will tell you generally what accounts were transferred to what other banks, and then you can go to those of the bank's. and in the parliament and switzerland you can change the law and say under that new treaty you're going to have to show that the bank that is in receipt of that account somehow or other work with and is guilty also of aiding and abetting. that is a very difficult burden. you can talk about the new treaty, and we hope it gets ratified, but its value is limited. it is the polls will be used by banks to avoid of, ponying up the names. want to ask you this question, not cool. have you urged the government of
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switzerland, the parliament of switzerland to allow you to give us the names of your customers that you aided and abetted in evading taxes prior to 2008? >> yes, we have. >> soaker now, as the bank's general counsel let me ask you questions. is it correct that as of september 2011 the department of justice issued to grand jury subpoenas to credit suisse seeking information from the bank in switzerland? >> that's correct. >> and those subpoenas in part ask for u.s. client names and account information for certain accounts going back to january january 2000. >> that is also correct. >> is it correct that while credit suisse produced some business records and information , it did not produce any account information disclosing u.s. plan names?
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>> that's correct. >> and the reason was swiss secrecy laws. is that correct. >> that's correct. >> the bank must have known that u.s. has case law bundled under the bank of nova scotia line of cases that says if a bank is based in a secrecy jurisdiction but does business in the united states and gets served with a grand jury subpoena that the u.s. interest in criminal prosecutions out ways the foreign jurisdictions interest in secrecy and that the bank must produce under that line of cases the requested information, are you aware of that? >> yes, i am. >> and so you knew that the day would come when the bank might be subpoenaed for information in switzerland and that a u.s. court would order the bank to honor the subpoena, but what actually happened here is that instead of enforcing the grand jury subpoenas in the u.s. court to obtain the u.s. plan names in
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switzerland the department of justice put the subpoena on hold and in september 2011 filed a treaty request instead to obtain the names. is that true? >> i think so. >> and that treaty request took two different request, to court decisions, two years, and we ended up with 238 accounts with u.s. client names. is that correct? >> that is correct because the treaty request was made under the current 1996 treaty with a very tough standard. as in as the new treaty would be ratified you would get, i'm convinced, many, many more, probably thousands of account names. >> but there are also 1500 accounts which were organized in the same way that the 238 came from which were the ones that were set up in third country jurisdictions using shell corporations. >> you're talking about accounts
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that's correct. the swiss district court has set up conditions under which they consider these entities to have fallen under this tax fraud standard and only 238, in their view. >> of the swiss court, again, made the decision which tonight us the names of accounts in switzerland open the pie shell corporations, by the way, many of which people here helped to set up the issue will get into later. it was, again, a swiss court which then denied us the names of your account holders which used shell corporations to cover up to the beneficial owners really were. that is totally unacceptable. i just hope that our department of justice understands that when
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subpoenas are issued and sit there and then forced year after year after year and the excuse is that the secrecy law in another country does not allow the subject of the subpoena to provide information critical to our tax collection that the department of justice as far as i am concerned is taking a totally unacceptable position, and we will do our best to change it. senator mccain. >> thank you, mr. chairman. i think the witnesses for being here. i would like to get something straight. is it true that at its peak in 2006 that credit suisse had over 22,000 accounts in switzerland for u.s. customers to have assets exceeding ten to $12 billion, is that roughly accurate? >> at the end of 2008 we had about 22,000 accounts.
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i think the total amount of assets referred to by the subcommittee is about 12 billion. >> so that is an accurate statement. >> generally accurate. yes. >> the date due to a swiss law restrictions, is it true that credit suisse has turned over to the united states names of only about 230 former u.s. customers with hidden accounts? >> yes, that's correct. >> so we are really talking about a miniscule number of individuals who have intentionally evaded u.s. taxes that has been revealed to the justice department or the department of treasury or other interested agencies. >> that's true. >> would you explain again what swiss law prevents you from providing that information?
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>> yes, perhaps i could ask mr. romeo cerutti. >> the legal point of view. >> senator, article 47 of the swiss banking law, banking secrecy provision prohibits us from furnishing any client names to anyone within switzerland are outside of switzerland. this is subject to imprisonment and fines. >> so in our real idea that this government of switzerland is cooperating with us is joke. if we can only get 230 names out of 22,000 accounts, anyone in the swiss government who alleges that they are cooperating with the united states in trying to track these people down is just contradicted by fact. five years ago credit suisse
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saddled with the sec and paid over $82 million for discouragement the president's. the sec settlement did not relate to the banks facilitation of tax evasion of u.s. plant accounts in switzerland. do you know what the profits from those accounts were? to we have a general idea? >> in terms of as opposed to the sec. >> the profits that you made from those accounts. >> no, senator, i don't think we have a good idea of that. i can, perhaps, lead you through some of the numbers that might give you an understanding of how those numbers developed. i don't think we have a precise idea. >> but those profits were pretty substantial given the number of clients and the $1,012,000,000,000 in the accounts. >> no, i think in terms of the importance of this business and is frankly one of the issues that makes this an issue that
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is, for us as well, this was a very small business, from our point of view it was about less than 1 percent of the profitability of our global bank. so this was actually a relatively small part of the business. obviously we are not in any way trying to avoid responsibility for the acts which happened in the behavior that clearly was small from an economic point of view, part of the business. >> i guess it is all dependent on how you look at it. it was $12 billion say 10 percent which is a modest reveal -- >> can i address the 12 billion? i think that is an important issue that we thought was worth spending a little time with the subcommittee on. >> you just responded, ten to $12 billion. >> that was the amount of accounts that we had outstanding as of the end of 2008.
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of that 12,000,000,005,000,000,000 of that as we went through and it a full investigation was determined to be fully tax compliant. not all of the 12 billion was not attacked compliant. 5 billion was taxed a plan. another 2 billion was actually determined to not have a u.s. taxpayer connected with it. >> were down to 10 billion. >> basically 12 down to about 7 billion. >> only $7 billion. okay. i think the point is that there you make quite a bit of profits even if it was a small percentage -- and i guess they all depends upon where you view the billion or $2 navy from credit suisse standpoint it is not much, but frankly from most average citizens that is a fair amount of money. in your statement will you accept responsibility and deeply regret the actions, how many
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culpable officers, directors, and key executives have been held accountable -- i mean fired >> well, senator, with this business will we determined to do starting in 2008-9 particularly after the actions of the subcommittee in highlighting issues was determined to set this business down. over the course of the last year's, the first two years after that we basically reduce the size of the business by about 80 to 85. >> how many employees were fired >> most of the people involved actually were fired as a part of shutting down the business. the vast bulk of them left the business as we showed down. >> mr. hans-ulrich meister, you are a high-ranking official and are directly responsible for overseeing a division that serviced many u.s. bank accounts in switzerland. >> that is true starting in august, 2011. >> there was an office in the
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zurich airport meaning a client's would not even have to enter the city to conduct these transactions. in interviews with the staff you said you're unaware unaware of that. >> in the interviews, it was not clear to me at this time. i took over the private banking as a ceo in august of 2011. there was a team. in the meantime the preparation, no there was a team. the team of around seven to a relationship managers and around 10,000 clients. you can see also that the bulk of the clients were smaller clients but the balance between 30 and 705,000 u.s. dollars,
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most of them did not have the securities. if you look at the channel and credit suisse, if a relationship covers around 100 it's around a thousand. there is a specific service for u.s. residents who came in, perhaps the house to my terrace what most of them are cash accounts, no securities accounts and no invents. >> so it really did not mean much that you had an office right there in the zurich airport. >> i don't say it did not mean much. that's what i learned in the meantime because i was not come as i said, accountable for this part. perhaps mr. romeo cerutti can give more. >> mr. senator, if i can add, this airport office as i mentioned, hans-ulrich meister has outlined some of the parameters of it. it was in an office where, as
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you say, an office of convenience. >> it certainly was. >> but basically they held relatively small amounts of money and there was no active management. and actually in our investigation which was a detailed investigation, we did not find any systematic issues in that area. >> mr. romeo cerutti, you conducted an internal review, 2008 that included looking at the sal in desk which primarily dealt with u.s. accounts. your review found no wrongdoing. yet in 2011 the department of justice found enough evidence to indict several employees from that task. how do you explain your inability and give a clean slate to your review of the sal in desk and yet the problem of justice found enough evidence to indict several employees from that same desk.
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>> senator, we did the review in the beginning of 2009. we looked at the desk, policies, trainings, the travel. we look also at the audit report, all that stuff. we did not determine that we have a problem. in retrospect that was a mistake . >> i think the witnesses. the thank you, mr. chairman. >> mr. brady dougan, and you're prepared testimony you said that the press under tech and extensive internal investigation to try and uncover potential wrongdoings . was there a formal report inside the bank on that investigation?
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>> well, it was a very extensive and long-running investigation. we were updated frequently. we had various discussions obviously without regulators, with various authorities here as well updating on the progress on that. our view has been that this continues to be -- we will continue to make sure that we are looking throughout the bank in doing everything we can to ensure compliance. we did not view it as a process that had ended but have constantly been updating and involved in lessons learned and improving the environment as a result. >> there was no report brought to your board or chief executive level, here is the summary of what happened? >> there was no formal one report. >> do you think that is unusual? >> i think it was -- i have to tell you, i think that our firm and certainly in my 32 years in the industry i have never seen a
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project with as much focus, resources, time spent on it as this issue. over the past five years this has been the single thing which is ben the highest focus for us as a management team. this is discussed regularly, and our executive board virtually every week, discussed a the outside board meetings as well. it has been a very integral part of our we have managed the business among we have done all along. from our point of view and not sure that we viewed it as -- in fact have you as a positive we did not view it as a project which ended and then we have a report which summarized it. it is something that we continue to work with on a daily basis. >> on this kind of plan, people would take tourist visas to to raise business which is no longer happening.
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was there one individual that promoted the scheme? where they held accountable? what has been the basis of that? >> the team that was involved in that -- and this is historic behavior, as you say to my pre 2008 behavior, a group which comprised of different numbers over time, ten to 15 different account officers. it was concentrated in that group. that is a grouper we find that we admit there was behavior that we certainly don't compton. we think it is egregious and agree with all the adjectives that were viewed by the subcommittee. and that was really the group that, you know, was involved in that activity. the managers of the group were clearly the managers to i guess workers fretted that. we did not see any -- we did not see any knowledge of that in the
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organization, and all of those individuals to drive many of them were part of the department of justice indictments, many of those individuals are gone from the firm and have been for a long time. that was the small focus group were we saw the behavior that was clearly not behavior that we would in any way continent or defend. >> if the justice department fully carried out what they could carry out in this country would you will comply with the subpoenas? >> senator, that is very difficult under swiss law. we would all face criminal indictment in switzerland and most probably prison terms if we would hand over these client names. if i may just say in the ubs
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matter that chairman live in mention that the very beginning that 4,500 names that ultimately were turned over were turned over as a consequence of a treaty that was entered into between the u.s. government and the swiss government which allowed that any accounts with at least a balance assets under management of 1 million more be turned over. i would say that under the new double taxation treaty, the one that still needs to be ratified here in the senate -- and i urge you to ratify this as quickly as possible, you will get many more accounts, and you can get them quickly and hopefully the 1 million asset limitation is not in that treaty. >> do you foresee a consequence of the justices apartment used all the tools and carried it through the courts that you might face prosecution in this country for not complying with the subpoenas? >> yes. >> so you have double jeopardy. where would you like to spend time?
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>> it's a tough decision. the psi report found that 1800 different credit suisse employees serviced the 22,000 u.s. linked accounts. according to them -- the committee's report only ten of the 1800 employees were disciplined, and no one was fired. is that an accurate statement? >> i think it is largely accurate, but maybe i can explain it. we did have a concentration of coverage of u.s. clients in a few areas. and the area where we have seen the systematic, problematic behavior was the area that had a specific focus on u.s. accounts. the larger group, the 1800
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number, those were our and throughout the bank, typically one or to u.s. clients. so there were not specifically focusing on the u.s. but my have an account that might have been -- the content and a u.s. citizen and was living in switzerland. the vast bulk of those simply had a few u.s. accounts. again, and the course of our very thorough investigation we did not find any systematic abuses in that group. >> thank you. one other question, credit suisse started in 2008. you undertook efforts to identify and close out noncompliant u.s. management. in other words, they were not complying with our tax laws. >> yes. >> how many noncompliant accounts were identified as part of your efforts? >> do you want to answer that? >> senator, if i may try to answer that, we did the other way around, tried to identify
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the ones that work and plan. over the time we have identified some 10,678 that were compliant and another 1,900 that lost their u.s. nexus that were not really -- so if you add that up you had about 8,500 that were not part of the 22,000. in addition you have of the 22,000 about 9,000 that had less than 10,000 u.s. dollars. a really small accounts. ..
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and throughout. >> i guess the way it is -- another way to state it that might help in terms of understanding the process. our top priorities would get to the point where all of the didn't here at the bank were compliant. that was our top priority. now, as part of that as well. we made the decisions around restructuring this business and there were many part wed just exited the business. so we didn't spend a lot of time determining whether they were or weren't compliant -- >> just closed accounts. >> yes. and that's how you go from -- go down by 80% in terms of the footprint in this business. so that was our priority. i think, asner cerutti said, every account has to be compliant and that was our most important goal. >> thank you. i yield. >> thank you. senator johnson. >> thank you, mr. chairman. mr. cerutti, how do you
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determine whether an account is compliant and. >> senator, today we have put all the fact requirements in place so we're really looking at whether someone is a u.s. person from a text perspective, u.s. nationality, green card, substantial presence test. we have the signs, all the documents. we're also looking at dual citizens, because often you have in europe people who might have been born in the u.s., and they're dual citizens now, so really looking at all of this people, and now they're signing waivers, they're all signing also a w-9 at this point, and then we transmit the account information to the irs. under be intergovernmental agreement that switzerland has entered into with the united states. >> okay. so, you are in compliance because they basically sign
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waivers and a w-9 which is reported to ther is sorries everybody knows they have an account and the income is reported to the irs. >> exactly. now starting july 1st, with -- someone would be a fool to sign all of that and not pay the taxes. >> i want to understand at bit about what is so different about the 230 accounts where we actually received the names versus the other 22,000. what is unique that those 230 names were actually supplied? >> historically, switzerland made a difference between what the swiss defined a tax fraud and tax evasion. and under the double tax yet toes in the past you would only be able to get the assistance in tax matter if the tax fraud standard was really fulfilled. and the swiss courts have determined that the 238 accounts
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have a tax fraud standard fulfilled. the other accounts, and by far not all of the 22,000 are not tax compliant, as i tried to explain before, but let's assume there are a number of those who are not tax compliant, that would qualify as tax evasion, they would be covered by the new treaty, because switzerland agreed to the new oecd standards, dropped the tax fraud requirement, and accepted the tax evasion requirement, accepted also in 2012, as was mentioned by chairman levin, the groupy. and so once this treaty signed the irs could just sort of send out these requests and these accounts should come in. >> so, 238 accounts were determined fraudulent, committing fraud. >> yes. >> how was that determined? how did the swiss authorities determine those 238 out of the 22,000 were actually engaged in
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some kind of tax fraudulent activity? >> senator, very good question. we have several court decisions by the swiss federal administrative court that have set the standards for fraud. typically these were entity accounts, like someone had an offshore entity, a u.s. person was sort of hiding behind an offshore entity. the corporate governance of the entity was violated. they have u.s. securities, i think these are the three main criteria to qualify for the fraud standard. >> how are those entities targeted? why -- how were they ever investigated? we obviously didn't know their names, so obviously swiss authorities open up some kind of investigation for those 238 accounts? >> yes, senator, there was a group request by the irs. it went to the swiss financial tax administration. they forwarded it to us at the credit suisse. we had to identify all these
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accounts that qualified pursuant to different criteria. we sent them into the swiss federal tax administration. it was a larger group than 238. they then decided which one in their views was qualified. they were then forwarded on to the irs by the swiss federal tax administration. some appeales offed this decision and those cases were decided by the swiss federal administrative court. >> okay. mr. meister, i think you mentioned some clients and swiss bankers were involved in some of these fraudulent transactions, basically your testimony. i'd like to review in general how important the swiss banking sector is to switzerland0s economy. the number is have is the swiss economy is somewhere between 700h hundred billion? anybody know? those are the figures i have.
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>> maybe i'm -- sounds right. >> i'm seeing the banking sector, 6% and 12% of that. so 40 bill does to $70 billion range. >> sounds right. >> the gep is that the possibility of the swiss banking sector? obviously total assets are much higher. >> yes, i think that would be profitability, yes. >> why would, let's say, u.s. investor invest in a swiss bank? what are to the motivations? >> to invest as an investor. you're asking as an investor. i think one of the point is no doubt that the -- because of the talent and what you can provide a service, bring attractive returns. >> have you historically had higher returns that unbanks or
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british banks or other banks? >> i would say largely in line. different in different years, obviously, but i would say not systematically different. >> so if u.s. investors invested about $12 billion into swiss banks, obviously that's a pretty small portion of the swiss banking assets held. right? isn't the credit suisse a trajectory dollars in assets -- train dollars in assets. >> that's correct. >> so you have a lot of investors from all over the world. >> yes. >> they invest in switzerland because? there's no exceptional returns in swiss banking. why do they do it in switzerland? >> i'm sorry. i misunderstand your comments talking about our equity. if you're talking about our asset base, which is over a trillion swiss franks, it's a combination of our ability to
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provide good service, competitive returns on the assets as a banking client. our able to provide lending to those clients, and i think particularly a -- obviously a comprehensive business we can off across asset management private banking and some of the wholesale investment banking type services. >> if i can add, also stability of the country and of course of diversification when you have two currency. >> i'm just trying to get to the obvious point why people put money in switzerland. >> yes. >> what is the obvious reason people take their money, transfer it from the united states or brazil or england or russia, and put the money in switzerland? >> well -- >> i just want -- let's state the obvious. >> i think, first of all, we actually -- we have a global business, so obviously that trillion dollars of assets is not all in switzerland.
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so we have a lot of those assets here in the u.s., in a -- >> i'm not a even targeting credit suisse, i'm talking about the switzerland banking sector. i would do people put money -- take money out of their country's of origin and -- >> you mean actually in switzerland as a country? >> right. >> historically, i think there has been -- one of the things highlighted, there's an ability to shelter assets and income from paying taxes. obviously that is decreasingly the case, and clearly going forward our view is that's not the future of the industry. that's certainly not our business model. we don't think that should be any swiss bank's credit model and with the number of arrangements taking place and also with a number of other developments, that's not an advantage that the swiss banging system is going to have going forward. so, it really has to be around the ability to offer services and returns that are competitive
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and in fact superior to what they can see in other markets and other places where they can put their money. >> i appreciate that forthright answer. it's important to get that basic obvious reality on the table as we're talking about this. that's what all the secrecy is about. so from the u.s. perspective we're trying to make sure that switzerland opens it up, makes i transparent to u.s. taxpayers can't shelter income over there if we want to invest in switzerland because of great returns, have the right to do that but not the right to shelter income. >> we're exactly the n the same place on that. >> thank you. >> you may be in the same place but the swiss government is not, still has on the law you knock release the names of an account. you cite that for not complying with a subpoena. so, maybe your bank is in that
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position, maybe for future deposits, but it sure as heck does not reflect where the swiss government is, and your bank is using the swiss government's position in arguing against the enforcement of subpoenas. it says it puts you in a difficult position. but you come to this country and you're governed by this country's laws, by almost universally accepted law, and yet you hide behind the swiss law, even though you're operating here, and that's just simply not going to cut it. the trouble is the justice department has been deterred by the swiss government's law, which you folks cite, and year after year after year goes by, with subpoenas not being enforced. to get the names that we have to
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have if we're going to enforce our tax laws and collect taxes owing to the united states. so, that's a huge issue. is it not true that the sways law continues to have on its books, you cannot release the name of your account holders? is that true? >> yes, that is true -- >> they haven't changed their laws. >> as we said, the -- >> if know treaties and i understand the whole business of treaties, and i know all the hole nets yet toes, including the one being apparently heard today in our foreign relations commitee. in that treaty you have a -- you buy a lawsuit if you operate under that treaty, because under swiss law, now passed by the parliament, the defense against that request is, you have to prove that the bank to which the funds have been transferred, somehow or other is part -- is violating the law, is contributing to the aiding and
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abetting. that's the burden of proof which someone has under the treaty. it's not, we want the names of the americans who have accounts there, the way we can get the names of accountness the united states. that's -- so there's a big loophole in this treaty which you continue to say we ought to ratify, and i'm all for it. it will provide some good. the key point is swiss law still requires going through hoops to get the names of people who are hiding their assets from our tax folks. that's the bottom line. so, instead of just having a direct response, listen, we're not -- we're bound by your laws, we come to your country and we're going to comply with them, and we'll take on the swiss government. if they try to prosecute us for complying with the laws of a country where we do business, we're going to take on the swiss government in that position. that's not sustainable. are you going to be -- do you
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think you'll be convicted in a swiss court? is the swiss government going to prosecute you if you comply with our laws turn over the names? are you going to be prosecuted? is that your fear? >> yes. >> that's your fear. >> that's my fear. >> okay. and in that case, let's be real clear here what we're talking about. you're not cooperating with us, hiding behind a law which applies in switzerland but does not apply here, and yet you want to do business here. you want to do business here. and that is not the way the international law is applied. you want to do business sneer you have to comply with our laws. now, let me go back to this so-called investigation which you have carried on. in answer to dr. coburn's question -- i believe this was you, mr. dougan -- you have an internal investigation going on
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the issue of aiding and abetting tax evasion and conducting interviews and looking at documents and so forth. you indicated there's not going to be a written report. i don't understand how you can have something as serious as you say you're undertaking and not have a written report, but that is your testimony. under oath oath. there are no written reports -- >> we have nod hat a summary written report. we have had a number of reports but we do not have a summary report. we view this as ongoing. >> we have asked you for those ongoing written reports, have we not? >> i believe you have and i think we have given -- many -- had many sessions with the subcommittee, updating them on the projects and the subcommittee's report today chronicles in great detail through many, many pages, all of the different efforts we have made over the past five years to get at this problem and get it right. >> let me go back to my
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question. you say you have some written reports but not a summary report. i believe we have asked you for the written reports you do have. is that correct? >> i believe we have provided on an ongoing -- >> no. i'm talking about the written reports you do have. i'm not talking about the summary report. i'm talking about the ongoing written reports. have we asked you for those reports? >> mr. chairman we have been asked for a lot of information -- >> due you know whether we asked for this written report, as part of this very, very detailed investigation that you have undertaken? you described this as a major investigation. >> absolutely. >> okay. and there are some ongoing written reports, notate summary report. that's what you just said. >> yes. >> these ongoing written reports, have you made those available to this subcommittee. >> i believe we have shared those with the sub committee. >> huh, mr. cerutti. >> we have shared the conclusions of our investigation but not any of these report that
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we had to prepare for other regulators and stuff like that. some confidential and cannot be shared with this commit. >> you give us a list of the reports we have asked for you have not shared with this subcommittee and the reason 0 you have not. not now. for the record. >> sure. >> even though you have not shared those reports, i want to ask you about the -- whether you can tell us about some of the things you found. for instance, halve you found that credit suisse bankers repeatedly traveled to the united states to get prospective u.s. customers and to serve existing u.s. customers in violation of your own policies? have you found that? >> yes, we did fine that with the limited group of people we mentioned. yes, we did find that. >> kid you find some swiss
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bankers advisedded u.s. customers to secure transactions under $10,000 which would then avoid triggering cash transaction reports? >> we did fine some conversations around that so we think there may have been some of that activity, yes. >> was that limited to the salm? >> it was, yes. >> you acknowledge that -- did you find that some credit suisse bankers helped refer u.s. customers to interimmediate areas who advised them to transfer their u.s. assets to foreign shell companies, and then treat them as foreign accountholders in the bank's own books. >> we did saw activity with private bankers referring, to as you say, outside potential arrangers. i'm not shire that any of that -- if you're saying some of that came back on our books -- >> oh, yeah. oh, yeah. just think about that.
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just think about that. >> yes. >> your banker referred customers to create shell corporations and tax havens, knowing that then those shell corporations would deposit those funds in their accounts with your bank under the name of the shell corporation. >> i view that just as egregiously has you do. >> who was fired for that? >> as we said -- >> no, no. was anyone fired who did senate i know a number of people have been fired or let go. i just want to know. people who would engage in that egregious act, illegal under our laws -- were any of those people fired? for referring people to intermediaries for the purpose
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of the mow going into the name of a shell corporation back into your bank. any of those people fired? do you know? >> i believe all those people do not work for the bank anymore but perhaps mr. sirty -- >> i don't know anyone who was fired specifically because of that. >> the issue, if i could just add, the issue, as you know, we began the exit of this business starting in 2008, and so we basically exited virtually 85% of the business over the course of the next two years. by the time we actually found this behavior, which we agree with you, we find it just as unacceptable as you do. by the time we found that behavior most of those people were gone. >> mr. cerutti, well -- were all of those anymore salm. >> i would say it was centered -- . >> not centered. were all the people engage in egregious conduct in salm?
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>> i wouldn't know, mr. chairman. >> senator johnson. >> thank you, mr. chairman. mr. dougan, let's go back to my line of questioning. i want to get the obvious on the table here. historically, -- let's go back. people around the world have deposited money into swiss banks as a real safe haven, correct. >> yes. >> is there validity to that? do you think people ought to have place whether they're in an incredibly oppressive regime, be nice to move some money out of that terrible country and put a in safe haven. >> what we see in terms of our customers robbed the world, they do have interest in even being completely tax compliant and no issues around that. they do have an interest in diversifying the jurisdictions where they hold their money. we see that as an interest from those clients.
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>> and the conundrum right now for the swiss government, you have obviously the united states government highly concerned about not being able to collect taxes because people are committing tax fraud and sheltering income there. and now they're having to open up information which puts at risk the ability of the swiss government to track those types of deposits. correct? >> well, i actually think -- our view is actually that the -- that us as an institution and the country, has to good to a compliant framework. there's no other choice. there isn't any other choice. and frankly, i think that the swiss financial system can be very competitive on that basis. i do not think that it is necessary, as you say to have these -- have the ability to not pay taxes on money in swiss banks for the swiss financial system to be successful. we would be a lot better off with a completely compliant and transparent framework. >> i agree. i guess that gets back to the
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question, credit suisse has actually -- you have tried to work with us and encourage swiss government to enup and be transparent because it's in your best interests as a global banking company, because you still -- there's still going to be value to have switzerland as a pretty stable, neutral country, as safe haven, a diversification destination for the global assets. >> we think that's exactly right. we think it's in the best interests of the swiss financial, our best interests, and we have absolutely promoted that at every level, publicly, with the regulators and the government, because we think that's the right direction for the business and the right direction for switzerland. >> i may be going to the foreign relations hearing on treaties later on, so mr. cerutti, how can we strengthen that treaty so we don't have loopholes? in the interests of transparency so that the swiss banking sector can still operate and provide that safe haven where it's
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required. >> senator, thank you for your question. i think this is a pretty good treaty. it goes very far because it's going to be really based on owe cd standard of tax evasion. it allows for group requests. it's untested yet. what chairman levin is afraid of is that the irs will have to prove the misbehavior of the bank or the participation of the bank, given that the d ooh j has issued that program, as you know, the program for the swiss banks and that over 100, i think 106 banks, have now filed to be in category two. i would assume at this point that all the category two banks, that the misbehavior requested under the treaty, would be established just by being a category two bank. so i would hope that this treaty would really generate thousands and thousands of companies. that my hope. >> senator, i guess what we
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would say is -- we understand the chairman's concerns about it and i'm sure there would be ways to even make that treaty more -- stronger and even better. this has been approved for four years, and our view is that a good first step would be to simply get it approved in the senate so we could provide -- in our view, provide the vast bulk of the information requested, we want to do that. with the treaty approval we think that would allow us to satisfy the bulk of that request from the u.s. authorities. so, i'm sure there are ways to improve it. down the line. we have been working very hard just to get the treaty approved, which is, in our view, the first step and would be a very important step in getting these issues to a great degree resolved and allowing us to provide the information we would like to provide. >> i asked a question earlier how you were able to determine compliance you. talked about clients were signing waivers, filling out
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w-9s -- what prevents you from having every client sign the waivers? >> every u.s. client has to sign these waivers. everyone who wants to keep an account or open account at credit suisse has to sign the waivers. >> perhaps you can explain the concept of the waiver. >> on the one hand there is the w-9 that reports the dividends and interest on u.s. securities. on the other hand there is the waiver so that we can file the information under the law, starting as of july 1st. >> so then what complicated that? we talk about shell corporations and -- i mean -- i think fatca is a wrap new law that has been implemented and will start taking effect. i was surprised when i read the report last night. just to see that the
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subcommittee is afraid that fatca contains loopholes, but i would say let's see how it starts. it's a huge, huge, huge administrative project. we have spent in the first, like up to now already spent $100 million to implement it globally because it's not just for switzerland or the private bank. we have to do it in the investment bank, asset management, private banking globally, and continue to spend quite an amount of money. this year's budget is another $40 million to 45 million tuesday. so we're trying to gist right. >> i think one of the things -- we feel the combination of the steps we have taken, with the waiver, with the full implementation of the projects we laid out, will allow us to be 100 percent compliant. so we feel very good about that.
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and in fact we also believe we see some progress in this, because as the exit project has gone on, we have not seen from any of our regulators or other investigative bodies, any issues coming up post-2009. so, actually that exit project we think has actually worked pretty well, and we believe we're in a position now, so we can be compliant. going forward. and as the chairman said, to make sure any business we do with any u.s. client is done on a completely compliant basis. that's our objective. ...
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of the 22,000 banks, customers that you had in 2006 at two you did the showing of compliance with our u.s. tax laws and when we talk about u.s. customers, 18,900 of those accounts that closed in today there are about 3500 that have been determined are in compliance. are those numbers correct? >> those numbers are correct as of today but i would like to add that in total we have reviewed tax compliance some 6678 of which about


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